UK: UK Anti-Corruption Initiatives: Bribery Act Update, Deferred Prosecution Agreements And New Sentencing Guidelines

Last Updated: 29 August 2013
Article by Kevin Cooper

In this, the most recent of our regular updates on on-going UK anti-corruption measures, we highlight recent suggestions of a possible review of the UK Bribery Act 2010 ("the Act"), outline the way in which Deferred Prosecution Agreements ("DPAs") are expected to work in the UK when they are implemented in February 2014 and summarise the proposed new sentencing guidelines for financial crimes published by the Sentencing Council for England and Wales in June 2013. While this article focuses on anti-bribery measures in the UK, the UK's anti-corruption initiatives should be seen in the light of international efforts to combat bribery and corruption. In recent years, anti-corruption laws have evolved in many jurisdictions largely as a result of the Organisation for Economic Co-operation and Development's ("OECD's") Anti-Bribery Convention 1997, whose signatories agreed among other things to adopt domestic legislation to criminalise the bribery of foreign public officials, to provide international assistance in prosecuting foreign bribery, to introduce corporate liability for bribery and to impose proportionate and effective sanctions for bribery offences. As at August 2013, 40 states, including the UK, are signatories to the OECD Anti-Bribery Convention.

UK Bribery Act update

The Act has generated some criticism since it came into force on 1 July 2011. Among the concerns that have been expressed are that there is uncertainty and confusion over compliance with the Act, that it puts UK small and medium-sized businesses ("SMEs") at a competitive disadvantage with their foreign competitors in the international market and that the Act's total ban on facilitation (or "grease") payments is very difficult for UK businesses operating in certain overseas jurisdictions to comply with. There have also been no corporate prosecutions under the Act to date, but only minor prosecutions of individuals in relatively low-level cases.

As a result, there was some suggestion in March 2013 that the UK government was planning a review of the Act, particularly reconsidering the blanket prohibition on facilitation payments. Facilitation payments are a particular problem for the shipping industry as they are almost routine in certain jurisdictions where little might be achieved quickly in local ports without them. In July 2013, however, the Ministry of Justice ("MoJ") confirmed that there was no intention to relax the application of the Act and added that "the Act is making a very positive contribution to the international consensus against corruption and helps to promote ethical business practices across the globe" (Chris Grayling, Secretary of State for Justice and Lord Chancellor, 11 July 2013).

Arguably, any review of the Act at this stage might have been premature. The absence of corporate prosecutions can perhaps be explained by the fact that the Act has only been in force for two years and it is likely to take some time for the Serious Fraud Office ("SFO") and other enforcement agencies to build up a case against any corporate that is contravening the Act. Indeed, over the past few years, there have been prosecutions of corporates for a range of alleged corrupt practices under previous anti-corruption legislation in cases that go back some years prior to the Act. Rolls Royce is currently being investigated by the SFO for allegedly paying bribes in China and Indonesia through intermediaries to secure contracts and, according to press reports, GlaxoSmithKline could in due course be the first multinational company to be charged under the Act following allegations that it is at the centre of an alleged £320 million bribery network in China that provided benefits to hospitals and doctors prescribing its drugs. Additionally, in August 2013, the SFO brought its first prosecution under the Act against four individuals in relation to alleged fraud at a biofuels company.

The head of the SFO, David Green QC, has emphasised his desire to focus the SFO's resources on prosecuting major corporates in what will no doubt prove to be headline cases. It has also been reported (although not officially confirmed) that Mr Green is of the view that international companies listed in London will come within the regulatory jurisdiction of the SFO. This is interesting in view of the fact that the Ministry of Justice has previously suggested that, broadly speaking, a London listing might not of its own be sufficient to bring a corporate within the ambit of the Act.

As to facilitation payments, these were in any event illegal in the UK prior to the Act, but the wider geographical bite of the Act, together with the MoJ/SFO's zero tolerance approach to such payments since the Act came into force has created a dilemma for corporates operating in countries where apparently little can be achieved through local officials without them. Be that as it may, any attempt to water down the Act's strict approach to facilitation payments would have been at odds with the OECD's current position, namely that member states to the OECD Anti-Bribery Convention 1997 should prohibit or discourage small facilitation payments due to their "corrosive effect".

Some have suggested that the Act should be more in line with the US Foreign Corrupt Practices Act 1977 ("FCPA"), which permits payments to foreign officials to expedite or secure the performance of a routine governmental action. This is, however, a very narrow exemption and is reportedly not widely relied upon because there is generally a concern of being sanctioned by the FCPA if the payment in question ultimately proves to fall outside the exemption. Furthermore, a guide to the FCPA published jointly by the US Department of Justice and the Securities Exchange Commission ("SEC") in November 2012 expressly disapproves of facilitation payments and (in line with the OECD recommendation – the US is a signatory to the Anti-Bribery Convention) states that the US encourages companies to prohibit or discourage such payments. It also warns that facilitation payments may violate local laws or anti-bribery legislation in other jurisdictions. Any suggestions, therefore, that the Act should be less draconian in its attitude to facilitation payments in line with the FCPA may well go unheeded.

Deferred Prosecution Agreements in the UK

The SFO has the option of using Civil Recovery Orders ("CROs") in place of prosecution, and has done so in a number of recent high profile cases of corporate crime. CROs are asset recovery tools, allowing an enforcement agency to recover and confiscate the proceeds of a crime. CROs do not involve criminal conviction and are intended to encourage corporates to self-report and co-operate with investigations. Their use has, however, been criticised by those (including a Working Group of the OECD) who think that the use of CROs, particularly as they are not transparent, gives the impression that the SFO is not serious about prosecuting financial crimes. It is anticipated that CROs may be used less in the future in view of the fact that the UK will introduce DPAs in 2014, although the SFO has already made it clear that it continues to view CROs as one of the many enforcement tools available to it.

DPAs are agreements between prosecutors and corporates where a corporate is allegedly guilty of a criminal offence (usually an economic crime). The corporate will be charged with the offence but any prosecution is suspended, conditional upon the corporate agreeing to a number of imposed conditions. These may include the payment of a significant fine; confiscation of the profits of wrongdoing; co-operation with future prosecutions of individuals; agreeing to external monitoring; agreeing to establish anti-corruption policies and procedures; and the provision of appropriate training.

DPAs have been used in the US for many years and are considered to be an effective prosecutorial tool for combating financial crime. The UK government has now introduced DPAs through the Crime and Courts Act 2012 and they are expected to be available for use by the SFO and the Crown Prosecution Service ("CPS") from February 2014. On 27 June 2013, the Director of the SFO and the Director of Public Prosecutions published a draft Code of Practice for prosecutors setting out their approach to the use of DPAs, and sought views on the contents of the draft Code as part of a consultation process due to end on 20 September 2013. As at time of writing, therefore, the final contents of the Code had not been confirmed but the draft Code reflects the SFO and DPP's anticipated attitude to when DPAs will be used, how they will work and the consequences of non-compliance.

Among the reasons given by the MoJ for introducing DPAs are: investigations and prosecutions are often disproportionately expensive and time-consuming; existing criminal penalties can sometimes have unintended detrimental consequences, such as a disproportionate impact on a company's share price or the collapse of a business; and corporates have little incentive to self-report, making investigations very difficult in some cases.

Not all cases of economic crime by corporates will be considered suitable for a DPA. A number of factors are likely to be considered by the prosecutors. The draft DPA Code lists the factors prosecutors should take into account when considering whether or not a DPA may be appropriate. For example, the following may be factors in favour of prosecution: the conduct is part of the established business practices of the company; severe economic harm to victims of the wrongdoing; a history of similar conduct; failure to report the wrongdoing within a reasonable time of the offending conduct coming to light; and failure to report properly and fully the true extent of the wrongdoing. Factors tending against prosecution include: a proactive approach when the offending conduct is brought to the attention of the corporate management team, involving self-reporting and remedial actions, such as the compensation of victims; the existence of a proactive and effective corporate compliance programme; and that the offending conduct represents isolated actions by individuals. In addition to the DPA Code, when deciding whether a DPA is appropriate in any case, the prosecutor must also take into account the Code for Crown Prosecutors and the Joint Prosecution Guidance on Corporate Prosecutions.

Further, unlike the US position, any DPA in the UK will have to be approved by a judge before it is finalised and comes into effect. The Attorney General's office has already made it clear that there must be effective judicial scrutiny, not "rubber stamping" of proposed DPAs. The judge must determine, among other things, whether or not the DPA is in the interests of justice and whether its terms are fair, reasonable and proportionate to the wrong committed. Whilst the judge will initially consider the proposed terms of the DPA at a private, preliminary hearing, the final DPA will subsequently be approved in open court: transparency is a key aspect of DPAs. Details of DPAs will therefore be published on the prosecutor's website, including the corporate's offence and the sanctions provided for in the DPA. An offending corporate will not, therefore, avoid public knowledge of its offending conduct by entering into a DPA.

Where a corporate breaches the terms of its DPA and the breach is minor, it may be asked by the prosecuting authority to remedy the breach. If it does so satisfactorily, then the prosecutor may take the matter no further. If the corporate fails to remedy the breach satisfactorily or if the breach is serious, the matter may be referred to the court. The court may either propose a suitable remedy, including a possible variation of the DPA, or it may order the DPA to be terminated. Where a DPA is terminated, the corporate faces prosecution for the original offence.

DPAs will have an expiry date. Once the DPA expires, and if the corporate has complied with its terms and conditions, the prosecutor will give notice to the court that the suspended criminal proceedings should be discontinued. The corporate will then no longer be at risk of prosecution for the alleged offence in question.

Proposed new sentencing guidelines

Notwithstanding the introduction of the Act over two years ago, there are currently no sentencing guidelines for bribery offences, although there are sentencing guidelines for fraud offences dating back to 2009. On 27 June 2013, however, the Sentencing Council for England and Wales published draft sentencing guidelines for financial crimes (specifically bribery, fraud and money laundering), as well as conspiracy offences. These guidelines include specific guidelines for sentencing corporate offenders.

The guidelines are aimed at making sentencing clearer and more consistent, and helping prosecutors to determine the appropriate level of financial penalties that should be imposed on an offending corporate when a DPA is being negotiated. There is a consultation period for the proposed guidelines, due to expire on 4 October 2013.

Interestingly, in producing their draft guidelines, the Sentencing Council has taken into consideration the US Sentencing Commission's sentencing guidelines for corporates, as well as the civil and criminal penalties imposed in the US. As a result, the UK guidelines provide for a court to impose substantial fines on large corporates that are higher than would otherwise be imposed on individuals.

Whilst the guidelines are still, at time of writing, in draft, their intention is clearly that any fine imposed must be substantial enough to have a real economic impact on the corporate and to make it clear to both the corporate's management and shareholders the need to operate within the law, i.e. to act as a strong deterrent.

The level of fines imposed will vary according to the facts of any given case, the seriousness of the offence in question and the conduct of the corporate concerned. The level of a corporate's culpability may be classified as high, medium or low. So, for example, low culpability may be assessed as putting in place procedures that ultimately prove to be inadequate; high culpability on the part of a corporate in failing to prevent bribery (section 7 of the Act) may be assessed as failing to put in place adequate procedures to prevent bribery.

Another factor in increasing the level of a fine is likely to be the loss/harm caused to the victim of the crime. On the other hand, self-reporting and co-operation with the authorities may lead to a reduction in a fine.

It is beyond the remit of this article to provide a detailed review of the way in which fines are expected to be calculated pursuant to the sentencing guidelines, particularly as the guidelines are, as at time of writing, not in their final form. In broad terms, however, the court will try to assess the amount of harm caused by the offence, i.e. the gross amount obtained or amount of loss avoided by the offending corporate as a result of the offence. Depending on the corporate's level of culpability, the imposed fine may be up to 400% of the "harm" amount if the corporate has high culpability. By contrast, where the corporate has lesser culpability, the fine may be in the range of anything between 20% and 150% of the "harm" amount.

The bottom line is that the proposed guidelines, if adopted in more or less their present form, will increase the certainty of corporate sentencing and will result in higher sentences in those cases involving larger corporates and serious offences.


It is clear that the UK government and prosecuting authorities remain determined to maintain a strict stance on eradicating bribery and corruption in accordance with the UK's obligations under the OECD Anti-Bribery Convention and generally to demonstrate the UK's commitment to being a country in which corporates operate their businesses, both home and abroad, with integrity and according to the law.

For corporates, our advice remains that adequate procedures and due diligence measures should be introduced to prevent breaches of the Act and any other anti-corruption legislation relevant to the corporate. For those corporates that already have procedures and measures in place, a regular review of those procedures is recommended to ensure that they remain adequate for the nature and scope of a corporate's business, the number of employees it has, the number and type of third party intermediaries it deals with and the jurisdictions in which it is active.

As already mentioned above, many jurisdictions have already either introduced domestic anti-bribery legislation or are in the process of doing so. In some cases, countries are enhancing their existing anti-bribery laws. Recent examples include Canada which, in June 2013, amended its existing anti-bribery laws to significantly expand the grounds for corporate liability. Even more recently, on 1 August 2013, Brazil enacted a new anti-corruption law that established corporate and individual liability for corrupt acts involving Brazilian and foreign public officials or government bodies. Corporates operating internationally should therefore be alert to the possibility that they will have to comply with multiple anti-corruption regimes when doing business and the landscape is continually changing, so policies and procedures should be regularly reviewed.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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